Cloud Computing: The Battle for the Enterprise

As one with large enterprise experience, I’ve seen first hand the challenge of migrating from old technology to new technologies on-premise. Migrations range from months to years depending on the size of the migration effort, as well as the number, and type of applications involved. In some cases, by the time the migration is completed, the hardware technology purchased has become obsolete and the vendor is only too happy to refresh your physical environment or provide an opportunity to consolidate your servers on to a larger, more expensive system. Cloud offerings seem to be the obvious solution.

However, the enterprise game is tricky, and if nothing else, the large, traditional IT players know how to play the enterprise game. When it comes to the enterprise, Amazon and Google which are highly successful in the consumer space, have a lot to learn. Admittedly, the reverse is also true, the traditional IT players have a lot to learn in managing and adapting their offerings to accommodate consumer technologies within the enterprise. That being said, large companies are in no rush to adopt cloud computing solutions or consumer technologies (even though it’s happening without them), and when they do, they will approach the challenge systematically.

Many of the Cloud computing leaders will get quite an education when they begin to address the large enterprise market segment, and seriously challenge the traditional IT players.

Personally, I’m struck by some of the cavalier attitudes regarding enterprise customer needs coming from some SaaS and IaaS providers with a sales force lacking enterprise experience. They seem to view Cloud adoption as a common sense decision:

We have a better mousetrap compared to what is available in the enterprise, therefore enterprise customers should just cut a check

Many of those harboring such beliefs cut their teeth in the consumer segment and try to apply the same approach to industries like government, healthcare, and finance to name but a few. Often, they have little awareness of regulatory considerations.

On the flip side, I have yet to come across an incumbent that doesn’t love the Private Cloud. I’m sure they would love to see Private Clouds take off as it’s their best chance to preserve the status quo and avoid the shrinking market for business technology.

In the interim, we should see an increase in technology purchases as Cloud Service Providers continue to grow and expand their Data Center footprints around the world, though in the long run there will be a show down between the traditional IT players (and their cloud offerings), and the emerging Cloud Service Providers.

Some Cloud Service Providers (CSP) have a sales force that see enterprise migration as a no or low-cost proposition (in the words of one young MBA, “no big deal”), and have little regard for the internal costs customers stand to incur such as retraining their IT staff, addressing process and cultural changes, adapting to managing applications in the cloud, and numerous other concerns.

CSP sales can’t understand why enterprise customers don’t just simply rip out their existing, integrated CRM systems and adopt a SaaS based approach. For all their knowledge of Software as a Service (SaaS), they lack often lack industry and enterprise experience, with many relying solely on their customer or SaaS provider experiences. Generally, they have little to no significant experience either working in a large enterprise or working with a service provider focused on the enterprise.

SaaS and IaaS sales teams are naturally more transactionally oriented while the incumbents have dedicated teams assigned to large customer accounts to defend and protect their territory, and they will have teams that while not strongly versed in consumer, SaaS or IaaS technologies, will understand enterprise concerns, and they will raise each and every single one of those concerns to keep the CSPs out.

Additionally, these traditional IT providers are often organized by industry verticals, meaning they are not only experts in large enterprise and managing senior level client relations, they are experts in their respective industries, whether its finance, telecom, healthcare, or government. They understand the industry challenges, and will have a good FUD story to tell those very conservative clients.

In the worst case scenario they will limit their losses by convincing their clients that hybrid cloud is the most reasonable, and safest approach. The will play the trust card. Incumbents have long-term relationship with enterprise clients, and these traditional IT players are positioning for Cloud too. Some may not be leaders today, but to underestimate their knowledge of technology, markets, enterprise, channels, and their vast resources and networks would be a serious mistake.

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My observation is that while leading cloud companies are enamored with the hiring of engineers, sales and technical staff primarily in the under 40 age range, they will face an uphill battle in the enterprise war without the soldiers that have the necessary enterprise experience. My advice? Don’t limit yourself! Go out and find enterprise sales warriors with the battlefield scars, and it’s not just experienced enterprise sales that you’ll need, but a whole array of roles that understand large enterprise operations, customer, partners, channels, finance, and IT. You’ll need insight and perspective on how enterprise players think and operate, how to navigate the enterprise politics, and how they do business.

One example of a SaaS player that has had some success with large enterprise customers is Salesforce.com. I attribute some of that success to the fact that its leadership and executives not only come from large enterprises themselves – Oracle, IBM, Microsoft, Telcordia, and others – but sold to and worked with mid and large enterprise customers.

Those SaaS and IaaS players that do not understand the enterprise and industry segments into which they are selling their solutions are making clear missteps. While it’s true that they’re learning along the way, that’s quite an expensive education.

Among other things, that enterprise expertise is what makes a company like Microsoft so dangerous a competitor. Google may have a better mousetrap, and they do like to poach enterprise generals from traditional IT players, though I suspect their results would be outsized if they had the generals coupled with a fighting force that is experienced in the enterprise.

It’s simply not enough to have a Board of Directors and Executives with enterprise experience. The front line soldiers through middle management will also need to have that experience, and most often companies like to breed their own internally, molding them right out of college, so I suspect that many will not have the requisite experience.

For now, all those issues lie dormant beneath the wave of excitement, growth, and rapid adoption of Cloud computing solutions by SMB and renegade business units within large enterprise.

Ray DePena worked at IBM for over 12 years in various senior global roles in managed hosting sales, services sales, global marketing programs (business innovation), marketing management, partner management, and global business development. His background includes software development, computer networking, systems engineering, and IT project management. He holds an MBA in Information Systems, Marketing, and International Business from New York University’s Stern School of Business, and a BBA in Computer Systems from the City University of New York at Baruch College.

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